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However, in its own evidence to the commission, BIS warned that increases in the minimum wage made employers more reluctant to hire.

“With the global economic recession, the UK experienced the deepest decline in output of the post-war period,” the BIS report said.

“The decline was arrested during the middle of 2009, but the recovery has been choppy and relatively subdued. The effects of the economic downturn are still being felt in the UK labour market in the recovery.”

It said that the commission should “consider concentrating their attention on the effect of a rise in the adult National Minimum Wage on employment”.

“There are also extra reasons to be cautious and moderate in recommending NMW (National Minimum Wage) rates for young people,” BIS said.

“Evidence suggests that labour market outcomes of younger workers are more at risk from the uprating of the NMW.”

The government urged the commission to consider how to “help to improve the employment status for young people”.

Dr Adam Marshall, director of policy at the British Chambers of Commerce, called for the youth and development rates of the minimum wage to be frozen this year.

“The simple fact is that Britain cannot afford to price people out of work,” he said.

However, Brendan Barber, the TUC general secretary, said freezing the minimum wage would be “wrong” and rejected claims that it contributed to youth unemployment.

“The LPC should recommend an increase that at least keeps pace with the growth of prices and earnings across the economy, otherwise the least well off will be left even further behind,” he said.

“The real reason why firms have not been hiring new workers is because they lack confidence that we have embarked on a sound economic recovery.”

Chuka Umunna, the Shadow Business Secretary, said ministers should repeat the bank bonus tax and use the money to fund 100,000 jobs for young people instead of holding back the national minimum wage.

"Only a Government that is completely out of touch would consider undermining the minimum wage which has helped low paid workers across the country since it was introduced by Labour, particularly at a time when inflation is running well above the Government's target," he said.